Exam 4: Financial Analysis-Sizing up Firm Performance

Firms that engage in multiple lines of business make it difficult to assign them to an industry category for ratio analysis.

Colton Corp. has current assets of $4.5 million. The current ratio is 1.25 and the quick ratio is 0.75. What is the amount of Colton's current liabilities (in millions)?

________ indicates management's effectiveness in managing the firm's income statement.

Snort and Smiley Incorporated has a debt ratio of .42, noncurrent liabilities of $20,000, and total assets of $70,000. What is Snort and Smiley's level of current liabilities?

A firm is conducting an analysis of trends over time and discovers that its inventory turnover has declined. This may be due to

Other things held constant, an increase in ________ will decrease the current ratio. Assume an initial current ratio greater than 1.0.

Assume that a particular firm has a total asset turnover ratio lower than the industry norm. In addition, this firm's current ratio and fixed asset turnover ratio also meet industry standards. Based on this information, we can conclude that this firm must have excessive

From the information presented in Table 3, calculate the following financial ratios for the Dooley Sportswear Company. current ratio operating profit margin acid test ratio net profit margin average collection period total tangible asset turnover inventory turnover times interest earned gross profit margin

Holding all other variables constant, which of the following could cause a firm's current ratio to decrease from 3.0 to 2.5? An increase in

According to the DuPont Analysis, an increase in net profit margin will decrease return on assets.

An increase in ________ will increase common equity.

A decrease in the return on equity ratio could be caused by an increase in

Which of the following financial ratios is the best measure of how effectively a firm's management is serving its stockholders?

Billing's Pit Corporation has an accounts receivable turnover ratio of 3.4. What is Billing's Pit Corporation's average collection period?

Financial analysis is equally important to large corporations and small businesses.

A firm has a return on equity of 20% and a total asset turnover of 4. Assuming a debt ratio of 50% and sales of $1,000,000, calculate net income.

Which of the following ratios would be the most useful in evaluating the ability of a firm to meet its short-term obligations?

When the present financial ratios of a firm are compared with similar ratios for another firm in the same industry, it is called trend analysis.

Ratios that examine profit relative to investment are useful in evaluating the overall effectiveness of the firm's management.

Consolidated Industries has total interest charges of $20,000 per year. Sales of $2 million generated an operating income of $220,000 and an after-tax profit of 6% of sales. The firm has a marginal tax rate of 39%. What is the firm's times-interest-earned ratio?